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Pylon Shield provides comprehensive Representations and Warranties (R&W) coverage for all loans originated through Pylon, up to $3 million per loan. This coverage protects lenders and investors from losses due to defects in loan origination, underwriting, or documentation.

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What are Representations and Warranties?

Representations and warranties are legal commitments about the quality and accuracy of loan files. When a lender sells a loan to an investor, they make representations (statements of fact) and warranties (guarantees) about the loan’s quality. If a loan later develops defects that cause losses, such as a borrower defaulting due to an underwriting error, missing documentation, or compliance violations, the party providing R&W coverage is responsible for repurchasing the loan or covering the financial losses. In traditional mortgage origination, R&W coverage is fragmented across multiple vendors. Each vendor typically provides limited coverage, often $10,000-$50,000 per loan, and only for their specific part of the process. For example, a credit reporting vendor might cover credit report errors, while an income verification vendor covers income verification issues. This fragmented approach creates several problems:
  • Coverage gaps - If a defect spans multiple vendors’ responsibilities, or falls outside any vendor’s scope, there may be no coverage
  • Coordination complexity - When issues arise, lenders must determine which vendor is responsible and coordinate claims across multiple parties
  • Insufficient coverage amounts - Small coverage limits ($10K-$50K) may not cover the full loss on a defaulted loan
  • Shared responsibility disputes - Multiple vendors may dispute which party is responsible for a particular defect

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Why Pylon can offer comprehensive R&W coverage

Pylon is able to provide comprehensive R&W coverage because we fully manage the end-to-end loan process and validate that every loan fulfills all investor guidelines. This gives us confidence that loans can be sold to investors, and we take on the risk.

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Full process ownership

Unlike traditional vendors who handle only a portion of the loan process, Pylon owns the entire loan lifecycle, from initial application through closing and funding. This means we’re responsible for:
  • Loan origination - Collecting and validating all borrower information
  • Underwriting - Performing programmatic underwriting calculations and eligibility determinations
  • Third-party services - Orchestrating credit pulls, appraisals, income verification, asset verification, and title services
  • Compliance - Ensuring TRID compliance, fair lending requirements, and all regulatory obligations
  • Documentation - Managing all loan documents, disclosures, and closing paperwork
  • Closing coordination - Facilitating the closing process and ensuring all requirements are met
Because we control every step of the process, we have complete visibility into loan quality and can ensure consistency across all aspects of the loan file.

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Investor guideline validation

Before any loan closes, Pylon validates that it meets all investor guidelines. Our programmatic underwriting system checks every loan against the same guidelines that investors use to evaluate loan purchases. This validation happens automatically and consistently for every loan, ensuring that:
  • Loans meet all eligibility requirements (DTI, LTV, credit score, etc.)
  • All documentation requirements are satisfied
  • Compliance requirements are met
  • Property valuations are appropriate
  • Income and asset verifications are complete and accurate
This rigorous validation process gives us confidence that loans originated through Pylon can be successfully sold to investors, reducing the likelihood of repurchase requests or losses.

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We take on the risk

Because Pylon manages the entire process and validates guideline compliance for every loan, we can confidently take on the R&W risk. We have the visibility, control, and validation capabilities necessary to stand behind our loans comprehensively. This is fundamentally different from traditional vendors who can only warrant their specific piece of the process. We can warrant the entire loan file because we control and validate every aspect of it.

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Pylon Shield coverage

Pylon fully represents and warrants all loan files for any reason other than fraud and Early Payment Default (EPD), up to $3 million per loan. This coverage applies to the entire loan file, not just specific components.

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What’s covered

Pylon Shield covers losses resulting from any defect in the loan file, including:
  • Underwriting errors - Incorrect eligibility calculations, guideline violations, or flawed underwriting decisions
  • Documentation defects - Missing or incorrect documents, improperly executed paperwork, or incomplete files
  • Compliance violations - TRID timing errors, fair lending issues, or other regulatory violations
  • Income/asset verification errors - Incorrect income calculations, incomplete asset verification, or verification process failures
  • Property valuation issues - Appraisal errors, incorrect property information, or valuation methodology problems
  • System errors - Data processing mistakes, calculation errors, or technical issues in Pylon’s systems
  • Any other loan file defects - Any other issue that causes a loss and is not excluded

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What’s excluded

Pylon Shield excludes two specific categories:
  • Fraud - Intentional misrepresentation by borrowers, loan officers, or other parties involved in the loan. This includes falsified documents, misrepresented income or assets, or other deliberate deception.
  • Early Payment Default (EPD) - Defaults that occur within the first few months after closing (typically 0-3 months). EPD is excluded because it often indicates fraud or material misrepresentation that wasn’t detectable during origination.
These exclusions are standard in the mortgage industry and reflect risks that are outside the control of the loan origination process.

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Benefits

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For lenders

Comprehensive protection without gaps Traditional R&W coverage leaves gaps between vendors’ responsibilities. Pylon Shield provides complete coverage for the entire loan file, eliminating these gaps. With $3 million in coverage per loan, lenders are protected even for high-value loans where traditional coverage limits would be insufficient. Simplified claims process When R&W issues arise, lenders work with a single point of contact, Pylon, rather than coordinating across multiple vendors. This eliminates disputes over which vendor is responsible and streamlines the claims resolution process. Reduced balance sheet risk Lenders typically need to hold capital reserves to cover potential repurchase risk. With Pylon Shield’s comprehensive coverage, lenders can reduce these reserves, freeing up capital for other uses. The $3 million coverage limit provides substantial protection that reduces the need for additional capital allocation. Confidence in programmatic lending Programmatic lending requires confidence that loans can be originated at scale without excessive repurchase risk. Pylon Shield’s comprehensive coverage enables lenders to scale programmatic lending with reduced concern about R&W exposure.

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For borrowers

Higher quality loans Pylon’s comprehensive R&W responsibility creates strong incentives to ensure every loan is underwritten correctly and documented properly. This means borrowers receive loans that are more likely to close successfully and perform well over time. Faster, smoother processing With a single provider managing the entire process, there are fewer handoffs between vendors that can cause delays or errors. Borrowers experience a more streamlined process with fewer requests for duplicate information or documentation.